Digital loans provide a convenient way to meet urgent financing needs through quick approval and disbursal. However, the ease of availing credit should not overshadow a careful financial planning mindset. Managing loan Equated Monthly Instalments (EMIs) along with existing financial commitments calls for disciplined budgeting for loan repayments and responsibility.
This article provides practical tips that borrowers can use to manage digital loan repayments more effectively. Following these strategies can help maintain a healthy credit profile and reduce the risk of repayment-related stress in the future.
Best Techniques to Manage Loan Repayment Plans
Here are some tips and tricks that will help you manage your digital loan repayments with ease:
1. Track Payment Dates and Credits Carefully
Digital lending apps offer seamless options to connect a bank account for easy EMI deductions. However, account balance fluctuations occasionally lead to failed payments. So, applicants should actively track due dates in calendars and account balances to prevent unintended defaults. Moreover, setting payment reminders and alerts days before debits also helps.
2. Prepay Partially
Many digital loans allow part-prepayments, where borrowers can pay extra amounts above required EMIs to save on interest and shorten the loan tenure. Even small increases, like rounding up usual EMIs, like paying ₹3,100 instead of ₹3,000 monthly, can add up substantially. However, most banks and non-banking financial companies (NBFCs) charge foreclosure or prepayment fees, especially for paying off large portions or the entire loan early.
One can additionally transfer lump-sum amounts occasionally, as funds permit, above mandatory dues for faster freedom from debts. Banks or NBFCs also incentivise such discipline by lowering credit risk perception and improving eligibility for future applicants.
3. Extend Tenure
In cases of temporary financial difficulty like medical emergencies or unexpected expenses, missing EMI payments can negatively impact your credit score. So, consider contacting your lender to discuss the possibility of extending your loan tenure which can reduce your monthly EMI burden. Approval for tenure extension is subject to the lender’s policies.
This reduces the EMI burden by spreading it over additional months to manage tight budgets. Loan providers prefer such diligent communication to uncontrolled delinquency.
4. Avail Moratorium Options
Regulatory measures during COVID-related stress allowed loan repayment flexibility without a Bureau score impact. Though no longer available, similar dispensations can be reintroduced in graver crises as a fiscal relief measure.
Monitoring advisories during such times helps contain hardship. Loan providers themselves want to support genuine repayment difficulty phases to ensure long-term customer retention.
5. Consider Balance Transfer
Customers with existing loans at very high interest rates can consider transferring the outstanding principal to another bank or NBFC offering lower rates. This reduces overall interest payouts. Rate differentials often justify the minor processing charges that a balance transfer entails for significant savings. The flexibility new lenders offer for tenure options also enables EMI size recalibration.
6. Avoid Unnecessary Loans
Managing current EMIs is already tough, and adding new debts for unnecessary things makes it even harder. Borrowing impulsively for vacations or gadgets can also hurt your ability to get future loans, as it worsens your debt-to-income ratio. It’s better to take new loans only for essential things, like home loans or education fees, so that your repayments match your income growth.
7. Automate Repayments
Digital loan providers provide options to register loan accounts for automated debit of the equated monthly instalments from the linked bank account. Activating this auto-debit mechanism ensures the instalments get deducted without requiring manual intervention. This prevents missing payment dates or forgetting to pay manually every month.
In case the bank account does not have an adequate balance on instalment due dates, specific lenders provide a minor 2-3 day grace period to credit the account with funds before re-debiting the instalment amount. Availing this facility guarantees timely repayments.
Conclusion
Responsible borrowing aligned with financial capacity minimises downstream repayment stress. Tracking dues regularly, prepaying when possible and discussing tenure adjustments during financial hardship can help maintain a healthy credit profile over time. Digital lenders, including providers like Shriram Finance that offer flexible personal loan options, make it important to stay mindful of risks as well as avoid over-leveraging while managing repayments responsibly. The above guide can help applicants strike a balance between convenience and sustainable borrowing.
